Agent of change

Consistent Group Ltd v (1) Kalwak and ors (2) Welsh Country Foods Ltd

There has been a lot of confusion in the courts recently as to whether agency workers are employees or not. This is an important issue because, under the Employment Rights Act 1996, employees have far more rights than workers.

In Consistent Group Ltd v (1) Kalwak and ors (2) Welsh Country Foods Ltd (IDS 833; 2007, IRLR 560), the Employment Appeal Tribunal (EAT) concluded, because of the exceptional facts, that the claimants were employed by the agency.

Basic facts

Mrs Kalwak and the other claimants were all Polish nationals who signed contracts with Consistent Group Ltd to provide them with work in the UK. They started work a few days after their arrival with Welsh Country Foods. The agency provided them with accommodation and transport to their work, and made deductions from their wages accordingly.

The contracts - “self-employed sub-contractor's contract for services” - stated that the claimants were not employees of the agency, and that there was no obligation on the agency to find work for them, nor on the claimants to accept (known as “mutuality of obligation”).

Although the contracts required the claimants to do the work themselves, there was a clause allowing them to substitute someone else. The claimants could also work for anyone else, as long as it did not “conflict with … the sub-contractor's ability to provide services for Consistent.”

When Mrs Kalwak and her colleagues tried to join a trade union, the agency dispensed with their services. They claimed they had been dismissed for trade union membership or activities; that they had been denied notice pay in breach of contract; and that the agency had made unlawful deductions from their wages.

Tribunal decision

The tribunal had to decide first of all whether the claimants were employees or workers. If they were, then it had to decide who was the employer - the agency or Welsh Country Foods Ltd.

The chair of the employment tribunal decided they were all employed by the agency. It, in turn, appealed arguing that the tribunal was wrong in law to conclude that the claimants were either workers or employees.

EAT decision

The EAT decided that the tribunal was right. It identified three main issues that were required to ascertain their status:

• Requirement to work personally for the agency. The EAT concluded that although the contract was worded so that the claimants could “use a competent substitute”, the initial obligation to do the work still rested with them. The power of delegation was therefore “limited and not inconsistent with that duty”.
  
• Mutuality of obligation between the agency and the claimants. The EAT concluded that the agency could prevent the claimants from working elsewhere if that conflicted with “their ability to provide services” to the agency. In effect, they were therefore compelled to take the work offered by the agency. And as the agency provided accommodation and transport, it was under a corresponding duty to provide work. The picture was one of “persons who went to work with no more practical alternative than ordinary employees; it was their job and they did it where and when they were told to by the agency”. The provisions relating to the right of the claimants to refuse work or to work for someone else was, in reality, nothing more than a sham. 
  
• Control over the claimants. The EAT concluded that the claimants were heavily reliant on the agency not just for work, but also for their accommodation and transport. Nor could they easily find work elsewhere because of the limitations placed on them by the agency. It therefore exercised enough control over the claimants to entitle the tribunal to conclude that they were employees.

The appeal was dismissed.